Did you know that Carmax, the used vehicle retailer, was actually the brainchild of the bankrupt consumer electronics retailer Circuit City? The company was formed as a unit of Circuit City in 1993 and then spun off as an independent company in the year 2002. Investors like Monish Pabrai talk about spin-offs being a prime area for identifying long-term compounders. In the case of Carmax, that theory seems to have worked out. Carmax’s stock has grown from around $7 in 2002 to $115 in June 2021. The decades-long growth has catapulted Carmax to the number one position in the used vehicle retailing industry of the US. Investors looking for auto stocks to buy right now might want to take a closer look at Carmax. The company performed quite well even during the pandemic.
More About Carmax’s Business
Carmax has built an omni-channel strategy that leverages both online and offline. It has built a website and related backend infrastructure to make sales online and then complement it by offering customers the option to pick up the car in person. The company’s 220 physical retail locations all around the country make it easy for customers to interact with the company, check out vehicles, and conclude a transaction. Carmax earned a revenue of $19 billion in FY2021. It transacted over 1.2 million vehicles and has built an auto loan portfolio of $14 billion. Carmax is the largest seller and buyer of used vehicles in the US. If you are looking for auto stocks to buy today, then Carmax seems like a promising option.
Auto Stocks To Buy Right Now
Throughout the past decade, Carmax has maintained gross margins of over 13%. The earnings per share have risen significantly from $1.79 in 2011 to $4.52 in 2021. Earnings per share had crossed the $5 mark in 2020. The company does not currently pay a dividend. The digital side of the business gives the company valuable data about the customer and the vehicle that they are driving.
